Crossing the Chasm with Geoffrey Moore

PLEASE NOTE: This transcript has been created using fireflies.ai – a transcriptions service. It has not been edited by a human and therefore may contain mistakes. 

 
00:03 
Dom Hawes 
Welcome to Unicorny, the antidote to post rationalized business books. I'm your host, Dom Hawes. This is a podcast about the business of marketing, how to create value, who's doing it well, and how you can help your business win the future. Today we're talking about the problems facing strategists and practitioners of marketing. Our guest, in my opinion, is the single most important thinker, strategist, and marketer of technology companies of all time. His work, by the way, is also highly relevant to other sectors too. So if you're not a technologist, don't go anywhere. His Wikipedia entry describes him as an organisational theorist, management consultant and author. Well, his writing credentials certainly are flawless. He is a professor of medieval English literature and he even taught English for four years at Olivet College before moving into the commercial world.  

 
01:02 
Dom Hawes 
His marketing, management consultant and organization theory credentials are impeccable too, because today's guest is Geoffrey A. Moore, author of Crossing the Chasm Inside the Tornado, the Gorilla Game, dealing with Darwin Zone to Win the Infinite Staircase, and probably a few more to boot. Before meeting Geoffrey, I just want to take a couple of moments to talk about technology and disruption, because some of you might think that what we're talking about today only applies to software companies and only disruptive ones are that. And I've already alluded to that a bit. My response? Not a bit of it, but let's dive in. First up, what is technology? Well, the Merriam Webster Dictionary defines technology this way. Technology is a capability given by the practical application of knowledge.  

 
01:54 
Dom Hawes 
Now, a technology company, under this definition, is a business that has codified and packaged a capability that will change or improve how another business operates. That could be software, it could be hardware, it could be a process, it could be a product. If it changes how another business operates, it's a technology. So does what you do change how another business operates? If so, you have a technology.  

 
02:22 
Dom Hawes 
Please listen on.  

 
02:24 
Dom Hawes 
But what about disruption? Sure, the specifics of the chasm itself, which we're going to explore a little bit later. That bit is for disruptive businesses, but the rest isn't. Consider this, if you're not a disruptor, someone is probably going to disrupt you one day. And as a marketer, you need to be able to play defence just as well as you play offense. This stuff matters. So please listen on. I wanted to bring Geoffrey to the Unicorny project because his work is so important, but in my opinion, it's largely either unknown or being ignored by so many marketers of this generation. We're going to cover this later. But the approach to marketing, particularly in B2B that I see right now, well, it's the same problem Geoffrey saw that made him write the book in the first place.  

 
03:12 
Dom Hawes 
This is how Unicorny's conversation with Crossing the Chasms author Geoffrey Moore went down.  

 
03:18 
Dom Hawes 
Today we're going to talk about the problem with marketing in technology companies, and we're going to use your life's work as a canvas on which listeners can paint a better way to utilize strategic marketing. Now, of course, not all technology companies have got problems with marketing, but so many do seem to get it wrong. And at its most basic level, I think the confusion over what marketing actually is or isn't, is causing an issue. And I want to address that a little bit later. But before we do that, in Zone to Win, you listed 54 technology companies that got it wrong. And I really want people to understand what the stakes are of getting it wrong. So give me a clue. Who were some of the 54 and what happened to them?  

 
03:57 
Geoffrey Moore 
They were the iconic companies of a generation. I mean, all of the minicomputer companies, the deck, prime data general, they're powerful companies. And then the whole, there's a whole PC set of application companies, Wordperfect, Lotus 123, Ashton Tate databases. And what happens in each case is the company is riding a paradigm wave and they ride that wave to excellence. But eventually, because of Moore's Law, and because tech for decades and decades has been able to redefine price performance at whole new levels, new paradigms emerge. And at that point, the company has a very fateful decision to make. Do I put more money into my winning franchise because it's under pressure, but I can still make money? Or do I take that money and put it into a franchise which is going to, in the short term, lose money?  

 
04:48 
Geoffrey Moore 
And these companies were public companies, and public shareholders do not particularly like this problem. So as a result, they waffled or they hedged or whatever. And the one thing you mustn't do in that situation is hedge. So as a result, they lost their way. And these iconic companies, I mean, Nokia had 40% market share at one point in mobile phones. It does not have a mobile phone business anymore. So it's pretty drastic.  

 
05:12 
Dom Hawes 
It's extraordinary, isn't it? I mean, the names you reeled off there. Nokia Pagemaker, Wordperfect. Lotus123. These were the tools of my youth. So it was a real surprise to see them all go to the wall for a while.  

 
05:24 
Geoffrey Moore 
Well, the management team made a mistake or blah, blah. No, they didn't. I mean, there were just way too many of these iconic companies failing. And so I think the point was we had the wrong playbook. And Clay Christensen wrote a book called the Innovator's Dilemma, which started to shine a light on this problem. I don't think it actually solved for the problem, but it certainly put it in everybody's perspective. And then I think what we're trying to do with Zone to Win, and this was largely the work of Microsoft and Salesforce. With me sort of stirring the pot in the background, was to say, okay, how do you play this game in a public market with an iconic company and sustain your franchise through a paradigm shift, which is, I think, the single toughest problem in tech.  

 
06:05 
Dom Hawes 
Their challenge was a classic innovators dilemma. Christensen and I think, as you say, he highlighted the issue but didn't really give anyone a playbook. And that's sort of what Zone to Win isn't it?  

 
06:16 
Geoffrey Moore 
That's the intent. The intent of the playbook. The Zone to Win Playbook is to say, look, when you're in this situation, there are genuinely conflicting priorities. You cannot afford to ignore any of them. But the operating model for addressing each priority is incompatible with the other operating models. And so what the zone model says is, look, that is a condition of existence, so don't try to overcome it, but zone to at least isolate the friction, minimize the cross talk and allow people to proceed separate agendas. And then you have to play an asset allocation game just like you would with a financial advisor. How much of my asset base or my operating income or my operating expense can I put into a versus B versus C?  

 
06:58 
Geoffrey Moore 
And then the last thing we did learn is that when you're in a disruptive innovation, there's kind of a two stage playbook. For an incumbent stage, one is organically engage with the new innovation so that you get smart about it and try to take it to market as best you can. The problem you're going to have at some point is that business is never going to be large enough to be material to your total revenues. So at some point you're going to have to do an M&A. But don't try to rescue yourself with M&A first because you'll just be a dumb acquirer. Make the investment in learning and getting as far as you can by yourself, then do the M&A.  

 
07:34 
Dom Hawes 
We're going to come back to that in just a minute. But first I need to say this, ladies and gentlemen, I hope you're listening intently because the real Geoffrey Moore is in the house. And we're going to talk tech marketing, which is exactly how I came across his work. Just after the millennium, I spent a year as VP marketing at GorillaPark, which was an early stage VC firm for technology companies. It was an extraordinary place with a visionary leader in Dutch, entrepreneur Jerome Mol. Thank you, Jerome. You set me on a course I'm still navigating. Anyhow, at GorillaPark, our modus operandi came right out of the pages of one of the most influential books on marketing ever written, crossing the chasm.  

 
08:09 
Dom Hawes 
Now, if you are a marketer listening or watching this and you haven't read it, go sit on the naughty step while you wait for Amazon to deliver it. And while you're online, pick up Zone to Win too, because that is what we're going to talk about today, Geoffrey. We're going to reference those two books, crossing the Chasm and Zone to Win a lot today. So maybe, I mean, you've hinted at it with Zone to Win. Maybe you could give us a little introduction to both kind of why you wrote them, why at that time and now, how the two of them work together, because they are symbiotic, aren't they?  

 
08:37 
Geoffrey Moore 
They really are. So all my life's work, I think, has been sort of shaped around technology adoption. And how does the technology adoption lifecycle affect the success in marketing a next generation product or a disruptive innovation? And so crossing the chasm was written more from the point of view of the start-up, more the GorillaPark type book. The advantage that a start-up has is they only have one place to put their assets. So all that Zone to Win problem, they don't have a Zone to Win problem. They have an investor who actually wants them to go through a J curve, wants them to lose money before they make money. They understand the bet. The venture portfolio play says, I know that some of you aren't going to win, but I can use a portfolio strategy.  

 
09:18 
Geoffrey Moore 
And if only a handful of you win, my portfolio will be off the charts. Well, why is that? Well, because the way in which technology adoption works is that there's these stages. And crossing the chasms talks about four stages. There's a book following it called Inside the Tornado that sort of completed the story. But the four stages were the early market where people believe what you believe and they buy in. But it's very project oriented. There's no ecosystem, there's no standards yet, but a few big companies will put the technology on the map. And that's kind of as a start-up, what you really want them to do, then crossing the chasm is finding that first repeatable use case, typically in a single industry with a single department, where basically you change the game in that world.  

 
10:00 
Geoffrey Moore 
And even though you're brand new and there's no standards, people go, I don't care, I want you. You are my life. You are the COVID vaccine. Okay? So that's what that's about. And the key to that crossing the chasm strategy was you need to focus on that one use case and nail it and start an ecosystem of partners that make money doing that use case. And you mentioned this thing about marketing. I just say the way in which crossing the chasm defined marketing became important because prior to that, tech marketing, I think marketing was thought predominantly as promotion, just communication and lead gen and promoting kinds of things. What crossing the chasm was saying was, yes, but marketing is also a territory capture game. And when you capture a territory, become the de facto standard of that territory.  

 
10:48 
Geoffrey Moore 
What happens is the whole ecosystem organizes around you. Your cost of customer acquisition goes way down, your lifetime value of a subscription goes way up. Life gets good. But you have to win the primary. It's like an American elections, you have to win the primary. You can't come in second or third or fourth. And so that was the whole strategy behind crossing the chasm. Pick a primary, win the primary, which was effectively dominate a use case in a target market segment, and then from there go into adjacent use cases. And what happens? And this is where the real take-off of tech happens. After three or four of those proof points, the majority, the mainstream pragmatist majority, says, hey, you know what? This is for real. It's powerful. We could use this a lot of different places. This isn't just one or two use cases.  

 
11:35 
Geoffrey Moore 
This is horizontal infrastructure. We should just do cloud computing, we should do mobile apps, we should use artificial intelligence and generative AI everywhere. And that creates this massive upswing in demand, which is where all the venture capital returns come from. If you have a company in your portfolio that is alive and kicking during what we called the Tornado, this huge up drafted demand, your portfolio did very well indeed. And that was the third game. How do you win in a tornado? And the game is don't break, just hang on ship, make your products work. And if you have proprietary technology and you're in a tornado, you're going to create one of the most valuable franchises in the history of mankind. You're going to create Microsoft, you're going to create Oracle, you're going to create intel, you're going to create Cisco.  

 
12:21 
Geoffrey Moore 
If you don't have proprietary technology, then you create these gunfights between, say, a Dell and an HP and a Lenovo or a Micron and a Samsung and a Hyundai in memories or something like that. Still great, but not quite as great. And then the fourth and final thing is, after the brouhaha settles down and people are saying, yeah, okay, it's microprocessors. We've been using microprocessors now for 40 years. So, guys, it's not like the category goes away, but it becomes much more like an industrial category. So the point was, there were four playbooks in that strategy. The early market playbook, the Chasm Crossing Playbook, the Tornado Playbook, and the Main Street Playbook. And each one had its own success factors. And again, the entrepreneur's problem is I have to morph my company to get through each new stage.  

 
13:13 
Geoffrey Moore 
The established enterprises problem is I can't let my main street core business oppress my next generation early market. Crossing the chasm business. And that's where the zone stuff came in.  

 
13:25 
Dom Hawes 
I mean, there's loads to unpack there, which I think we'll do probably throughout the interview. But I think a really interesting point.  

 
13:31 
Dom Hawes 
We mentioned, we're going to talk about definitions.  

 
13:33 
Dom Hawes 
As you were talking there, I'm hearing the wheel of time. One of the reasons you wrote the book was that at that stage, technology marketing was lead Gen, demand Gen. It's MQLs. All the things that the B2B, or certainly in tech over here, is wrestling with right now. I hinted at that in the introduction today, that the definition of marketing maybe has gone back to what it was pre 91 when you wrote Chasm. And maybe that's why a whole new generation of people need to embrace that work.  

 
14:05 
Geoffrey Moore 
The whole MQL lead gen thing is what we would call a Main street playbook. Once the category is established, once people have budget for the category, then by all means do all the communication tactics that you can think of. The challenge of the next generation stuff is people don't have budget for it yet, and there isn't a category established yet. So no matter how much you advertise or promote, people are going, what are you talking about? Or I think I understand what you're talking about, but we're not set up to do that here yet. And so therefore, the need to think about how do you get that next paradigm started? And so it starts with thought leadership and the visionaries, and basically you just tell a story. I mean, the whole venture capital pitchbook is just a story. There's no facts.  

 
14:51 
Geoffrey Moore 
It's all about the future. What happens is you get venture capitalist investors plus some early adopting customers to say this could be the next big thing. I'm going to bet with you on it. And the way they hedge their bet is they sort of take over your company. Basically what they say is I'm going to write you a big check and you're going to do exactly what I need. And so it's kind of for them, what they think of it is they're funding a project and it's not scalable and it's off your roadmap. It screws up every plan you ever had, but it puts you on the map, particularly if the company is an iconic company.  

 
15:26 
Geoffrey Moore 
When Merrill lynch did an early project with Salesforce that put Salesforce on the map, when the CIA did an early project with Amazon Web Services that put Amazon Web services on the map, neither of those projects were replicatable. They were both one off, but they put them on the map. And then you have the crossing the chasm thing and still even in crossing the chasm, they still don't have budget for you. The difference is they have budget for the wrong thing. And so what you have to do is divert it to the right thing. But again, lead generation doesn't work because lead generation is designed to find a budget. Well, you're looking in the wrong place. So you've got to actually have a dialogue with the customer about the problem that they are struggling with and not solving and get them to redirect budget.  

 
16:10 
Geoffrey Moore 
Once you get to the tornado, for the very first time, everybody has budget. Now we can unleash the masses and do the thing, but not before everything.  

 
16:20 
Dom Hawes 
Seems to come back to lifecycle because as you've documented, the market changes so significantly at each of the stages. But do you think many of today's marketers, probably barring the absolute market leaders, do you think they know where they are on the lifecycle? Do you think they spend a lot of time thinking about that? Or do you think they just do more marketing?  

 
16:37 
Geoffrey Moore 
To be fair, a funny thing happened on the way to the forums that place way back. But when we turned from the 20th to the 21st century, the 20th century was dominated by enterprise computing. It was a completely B2B World. There was a little B2C, but it was kind of trickle down stuff. What happened at the turn of the century was the power ratio flipped and consumer computing took over the world. So it was Facebook and Google and Amazon and all the transactional amazing stuff. And so when that happened, then all of a sudden, people said, well, the life cycle. What lifecycle? There's no lifecycle. And it's true with a consumer offer, particularly with the freemium model, the try and buy it.  

 
17:20 
Geoffrey Moore 
And we used to say at the beginning of the century, Url stands for ubiquity now, revenue later, which, by the way, the first time you saw that playbook, you thought, that's the craziest playbook I've ever seen in my life. It just turned up to change the world. In that playbook, the lifecycle is a function of inertial resistance for the consumer markets. The consumer doesn't experience the inertial resistance. Now. The established incumbents do. So, for example, when we had the Internet take-off and the World Wide Web take-off and Netscape browser take-off, all the telcos just went to their elected representatives and did everything they could to shut this thing down. So there is resistance, institutional resistance, but there wasn't customer resistance.  

 
18:05 
Dom Hawes 
The impression of a cloud SaaS platform is that, again, it's a freemium model, and it's really easy to adopt. Of course, when you get into enterprise systems where on a per seat basis and you're selling into other enterprise, the numbers are big, and therefore, you have the same buying considerations that you did with back in the mainframe days.  

 
18:23 
Geoffrey Moore 
Yeah. No, the enterprise system, first of all, there's simply the size of the purchase from aggregation. But second of all, there's the technology risk. There's the career risk. There's the tech debt problem and the stack problems. No, there's an enormous amount of inertial resistance toward any B2B digital transformation. We've been talking about digital transformation for the entire century. But frankly, prior to COVID, it was just slogging along. I mean, COVID gave it an enormous and an enormous exogenous boost. But in the B2B world, a lifecycle model will always be there. It's in the B2C world, because the B2C World, at least for the consumer, there is no risk. That's you take the friction out there.  

 
19:11 
Dom Hawes 
Yeah. Consumer products these days are really easy in. You don't even really need training, do you?  

 
19:14 
Dom Hawes 
Because they're so well designed.  

 
19:16 
Geoffrey Moore 
Yeah. The danger, by the way, there is a problem that people have there, which we won't. This is another book which I may or may never, ever write, which is I've called the Order of magnitude problem. What you ought to do is say, look, just use the order of magnitude of ten and understand that any play that gets you one order of magnitude. Might get you to the second one, but will never get you to the third one. But what happens is people say, Mike, I got 100 users, great, get 1000. Oh, well, I have 1000 users, great, get 10,000.  

 
19:46 
Dom Hawes 
I get where you're coming from. Yeah. And different behaviours needed at each stage. So look, although the two books are aimed at different audiences, a lot of the terminology in chasm still applies, and I think it's being misapplied quite a lot, or misunderstood, certainly. So maybe we could just sort of step back a little bit and think about some definitions. Marketing is one of them. I said at the top of the show that people's definition of marketing changes, and I think we've talked about that on Main Street. There's nothing wrong with promotional communication. But my observation at the moment, certainly from speaking to CMOs on this podcast, is that most of the marketing done in organizations is now being done by people without marketing in their job title. And that's the market development work.  

 
20:26 
Geoffrey Moore 
So there is these two things. There is a discipline called you and I would call marketing communications. But when most people say word marketing, they think that is the total meaning of marketing. And what you and I are united on and what the book certainly tries to talk about is there is another dimension of marketing. You said market development, which I think is as good a phrase as any, but it's essentially a territory capture game. And if you think about it like a territory capture game, what that tells you is if you get a million dollars worth of revenue, but you get it from ten different customers, or in ten different countries under ten different applications, you have no power. You have a million dollars, but you have no power.  

 
21:09 
Geoffrey Moore 
But if you got all of that, a million from one set of customers in one segment with one use case, you've effectively won, we call it won, the primary, you have power. And so marketing as a power discipline, I think, is distinct from marketing as an execution discipline.  

 
21:29 
Dom Hawes 
Okie Dokie, let's take a break to recap on a couple of important points made, because we've had a few money shots already. The first one, and this is a biggie, is that Geoffrey Moore's work is shaped around the technology adoption lifecycle. And just to be clear, that's different from the product cycle. Your product may be new, but the technology in it, or upon which it relies might not be. And the technology adoption lifecycle is more important than your product lifecycle. For example, last week's guest Joerg Klueckmann started his career at Intershop, which was an ecommerce platform first brought to market in 1995. Intershop's product lifecycle started before there was a real market. So at that stage, the product and the technology lifecycles were both synced at Innovation Stage.  

 
22:23 
Dom Hawes 
Now, Intershop went on to become a darling of the.com boom, and in the year 2000, its market value rose to $11 billion. But that soon collapsed to Penny share status. Now, Intershop survived the crash, but what happened as it progressed was its product lifecycle and the technology adoption lifecycle were out of kilter. Intershop's product itself was maturing faster than the market, and it carried all of the associated costs, so that when it came to the peak of its hype curve, the market itself was still in very early stages. There simply wasn't enough market to support it. Intershop survives today, but it serves a very different market and turns over just north of €37 million. Next, consider another ecommerce platform, Shopify. Shopify was founded in 2006, and by that time, the effects of the crash were well and truly gone.  

 
23:17 
Dom Hawes 
And while Shopify was at the very beginning of its own product lifecycle, the technology adoption curve, the technology ecommerce platforms, well, that was through Innovator, and now it was into early adopter stage. What that meant is that Shopify didn't need to educate or find innovators like Intershop had to do. Instead, it could launch straight into a bowling alley. It took six years from founding for Shopify to reach $24 million in sales. And by that stage, of course, Cloud was a thing. So Shopify was able to present a genuine whole product just as the technology adoption lifecycle moved into the chasm. Fast forward another six years. They recorded sales of over $1 billion.  

 
23:59 
Dom Hawes 
Shopify entered the tornado sometime in 2013 or 2014.  

 
24:03 
Dom Hawes 
It listed in 2015 and hasn't looked back since. Today, Similartech.com reports that Shopify Powers 642 984 websites with revenues for 2022 in excess of $5 billion. What can you take away from this? Well, the case I'm trying to make is that the technology adoption lifecycle is more important than your product lifecycle as a factor that drives how you should do your marketing. The team at Intershop, they did nothing wrong. They executed well. They were just too far ahead of the market. But what is a market in Chasm? Geoffrey Moore gave a really strong and helpful definition. Here's how he explains it.  

 
24:48 
Geoffrey Moore 
If you're thinking about marketing, particularly as a territory capture game, you want to define a market segment. First of all, there's first clarification distinguish between category and market. And the reason why this is important is financial analysts and industry analysts do not. They will talk about the PC market. Whereas in our vocabulary you say, no, it's the PC category. And the way we differentiate between category and market is we say categories are defined by a set of competitors, markets are defined by a set of customers. So that's the first distinction. So you say, okay, set of customers, great, now what's a market? And you say, what's a set of customers that have a common application or use case and who talk to each other when making buying decisions. And that's where the communication and the strategy come together.  

 
25:39 
Geoffrey Moore 
Because what pragmatic people do is when they're making high risk buying decisions, which is what enterprise B2B decisions are, they will consult with their peers and they want to do whatever their peers are doing. They want proven solutions with references from peers. We had been doing surveys and marketing in the year after year about what's the most important marketing or most influential marketing for channel. And every time it came back word of mouth. So you said, why word of mouth? Well, because pragmatists want to hear the reassurance of their peers. So all of the marketing communication that's strategic is designed to amplify and maximize the word of mouth marketing for your target market segment. And winning a deal outside of your segment does not help you. It doesn't hurt you, except that it distracts resources, but it doesn't hurt you.  

 
26:27 
Geoffrey Moore 
But it doesn't help you. Whereas winning a second or third or fourth or fifth deal in the same community begins to amplify at some point you just become the de facto standard and game over.  

 
26:38 
Dom Hawes 
Good point. I'm going to come back to that in a minute. Now, we talk about customer needs a lot as marketers, but in chasm you spun that in a very slightly different way. Instead of need, you talked about a compelling reason to buy. Why did you feel the need to articulate it that way?  

 
26:55 
Geoffrey Moore 
Yeah, well, so we had this phrase, target customer, and compelling reason to buy was the phrase that we ended up using. Because what were noticing in marketing is that our clients had a compelling reason to sell. Basically, they were not focusing on the compelling reason to buy, they were focused on buy my thing. It's cheaper, it's better than the other guys. And the reason why it's important is of course, that's the source of demand. And again, as you get further through the lifecycle, that compelling reason to buy gets more and more sort of absorbed in the category. You don't need a compelling reason to buy the next case of beer, right? I mean, it's in the store. Go get it. But you do need to have a compelling reason to buy generative AI for your call centre.  

 
27:40 
Geoffrey Moore 
What am I going to do with this thing? And then what it allowed you to do, if you focus on compelling reason to buy, it gives you a design centre to design backwards from. Like, if that's the compelling reason to buy. And we called that design what you were designing. We called it the whole product. Actually, Ted Levitt was the guy who coined the phrase whole product. But the whole product was whatever is necessary to fulfil the target customer's compelling reason to buy. And that allowed you to design backward from the problem, which allowed you to focus your R D, focus your roadmap, focus your marketing, focus your professional services, et cetera.  

 
28:16 
Dom Hawes 
Cool.  

 
28:17 
Dom Hawes 
Okay. Beachhead.  

 
28:19 
Geoffrey Moore 
Beachhead was the first. So this was a D Day analogy given all the wars that are going on, and my God, now we've started something else. But the point about that is you want to go. When the Allies were trying to liberate the continent back in the 1940s, they didn't send their troops, like 27 different beaches. They pretended they were, but in fact, they sent them to Normandy. And you say, why Normandy? Normandy. Who cares about Normandy? Got to land somewhere, landed somewhere. Once they landed somewhere, then they could march on. Same problem. So when you're in the chasm, remember, this is a state where nobody has budget for you.  

 
28:57 
Geoffrey Moore 
It doesn't mean you can't win a sale, because if you're a persuasive salesperson with a wonderful presentation and you sell well, you probably can win a sale, but you've got to then overcome the inertial resistance of there was no budget. So then your customers got to go get a budget and whatever. Well, the visionary customers will make that step, but it doesn't scale. So the beachhead market was a market that was characterized with a broken business process that was serious enough, and they tried the conventional solutions and it didn't work. So they would look across the chasm saying, is there any Yahoo on the other side of this chasm that can help me solve this? Because I'm about to lose my job and I do not want the CEO knows my name. And this is not a good thing.  

 
29:39 
Geoffrey Moore 
And so the idea with the beachhead segment was find one of those and then do whatever it takes. And this was hard for the entrepreneur because, as Steve Jobs said, when the Macintosh became famous for desktop publishing, we dIdn't create a computer for graphic arts department and Enterprises. We created a computer for everybody. But for Beachhead, it was like, yeah, but that was the beachhead.  

 
30:01 
Dom Hawes 
And then that leads into a bowling alley.  

 
30:04 
Geoffrey Moore 
Then the problem is, if you go to your venture capitalist and you say, hey, read Crossing the Chasm... got this great beachhead idea. Oh, this is very good. And they say, well, how big is the market? Oh, I think it could be like $50 to $100 million. They're going, yeah, you want to say more? We need to get you to a billion. But the problem is, if you start with a billion and you're this little company, you just do. You're a minnow in an ocean. So the bowling alley model said, look, keep your eye on what we ended up calling fish to pond ratio. Make sure that at any given time, your fish in a pond that's of a size that it could dominate. So, initially, if you're a $5 million company, maybe you could dominate by growing really fast.  

 
30:49 
Geoffrey Moore 
A 50 to 100 million dollar market, probably not much more than that. So that first target segment, maybe that size. But once you do that now, the bowling pin said, okay, what about adjacent segments? What if we took the same customer with a new use case so we could sell more to the people that have already bought from us? Or can we take the same partner ecosystem, who knows this use case into a new customer segment? And the answer is, you did both. That's why we had the bowling pin array. And then the bowling pins can get you from, I would say, 50 million to 500 million, almost. It's the most reliable play in all of high tech. If you would be satisfied with getting to a half a billion dollar company, you should just bowl, Skittles, whatever you want to call it.  

 
31:33 
Geoffrey Moore 
But then, to be fair, at that point, the tornado kicks in. And again, we're talking about the iconic companies that didn't make the transition. So Wang nailed the bowling alley for word processing. They went after the legal profession. They went after the professional services. They went after the public sector. They nailed it. But when WordPerfect and the PC came along, they couldn't get into the tornado. So you can get stuck in the bowling alley. By the way, tandem computers got stuck with doing ATM machines and some switches in telco. But tandem is still a franchise 35 years later. So it's not like it went away. But you don't stay with the times.  

 
32:15 
Dom Hawes 
Are there rules around moving through the bowling alley? I know if you were studying Ansoff, then before you diversify you want to be dominating the market you're in. So you've got to do your segmentation and targeting well, as you say, to target something you can build power in before you move on to something else.  

 
32:32 
Geoffrey Moore 
That's absolutely key. And the tendency is if you spray and pray initially, by the way, you'll actually get a burst of revenue, but you can't keep it. And the reason why is because the company's power is not so much a function of the company as of the ecosystem of the company, keeping the company in place, because that's how they make a living. So the reason Oracle is still around is because all those extra people kept Oracle in place. Same thing with intel and the same thing with Microsoft, et cetera. The key thing then is make sure you've got enough business and enough momentum and enough de facto leadership that when you leave that segment to take your attention elsewhere, it doesn't revert to chaos. You've got to build your castles along the way as you're going to conquer the world.  

 
33:21 
Dom Hawes 
When times get tough. And you and I had a very brief call a couple of weeks ago to explore today's conversation, and you came up with a phrase that I loved, which was when the going gets tough, it's time to go bowling or something along those lines back to the beginning of the bowling alley. And it strikes me that right now, when times are tough, many companies could do themselves a great service by going back to the bowling alley and questioning which markets they're actually.  

 
33:46 
Geoffrey Moore 
I mean, the bowling alley playbook, it's not the fastest growing playbook because if you could be in a tornado and you can be a gorilla in a tornado, you're going to buy islands in the Caribbean or off Mallorca or wherever you, I mean, life's going to be very amazing. But for most of us, most of the time, the bowling alley playbook is totally reliable. The key to the game is you have to find a target customer with a truly compelling reason to buy. So one of the things we talk about there in the bowling alley, you can talk about it anywhere, but the bowling alley makes it really crystal clear where's the trapped value. So in this industry, what business process is essentially holding the rest of the enterprise back?  

 
34:24 
Geoffrey Moore 
And then can your technology break through that roadblock and change the dynamic and free that trap value? Because if you free the trap value, the customer will give you a portion of that trap value in payment for your stuff. My experience is customers thrilled. If you give a customer a dollar, they're happy to give you a dime, $0.15. They think you might be overcharging. Okay. So the point is, if you just use that math, you say, okay, if I want to make $100 million, I got to find a billion dollars worth of trap value. I have to release a billion dollars worth of trap value to do that. So what the bowling alley play lets you do is it says, take that strategy and say, okay, to make it real. Trap value doesn't just want to be released. I mean, it's stuck.  

 
35:11 
Geoffrey Moore 
So the more you can focus on a particular industry, on a single process, and typically, the more it's stuck. One good thing, one bad thing. The bad thing is it's going to take a lot of work on your part to open it up and free it. And by the way, you may take some partner ecosystem people as well to do it. That's the bad news. The good news is you get that thing open, boy, you will not have any competitors. Everybody will flock to you. So that's why in a downturn when people are basically hesitant, the trap value argument, if you say, look, there's trap value, this is what's holding you back, and you could release it this year, they'll play. They will play.  

 
35:50 
Dom Hawes 
Boom, There you go. That's the money shot right now. I don't think there's anyone listening who probably can't take advantage of that in at least some way. Which sort of leads me on to the next question from the team in chasm. You gave readers a really strong formula for positioning, and I've used that myself many times. We sort of talked about this a little bit earlier, and I suspect I already know the answer. But do you think it's getting harder to create distinctive positioning these days, or do you think that if people think it is getting harder, it's a sign their market development and definition isn't being done properly?  

 
36:22 
Geoffrey Moore 
Yeah, if you think about it as words. The problem is positioning with just words is getting harder, and particularly now, except apparently in politics, where if the position is completely and completely outrageous, it seems to be able to stick perfectly. But if you think about positioning as power as opposed to words, then I think that the classic positioning, and particularly for the bowling alley crossing, the chasm positioning statement was, look, there is a trap value broken process. Okay, so who are the legitimate contenders to help the customer with this problem? Well, they have incumbent vendors. The Cummin vendors have domain expertise in the customer's business. They have trusted relationship, but they don't have the technology to beat the problem.  

 
37:10 
Geoffrey Moore 
Then there's other vendors who look more like you, their start-up or whatever, they have technology that is good or maybe better than yours, but they have not focused on this particular use case. So the positioning problem is just we are the people who have the breakthrough technology and have focused on the use case. And so the example I used the last time I rewrote crossing the chasm was I used box, the file sharing company at the time. So at that point, Microsoft SharePoint was the incumbent. It was a place where everybody put their documents, they kind of went there to die because nobody ever wanted to actually get into it. Actually that was a horrible user experience. But it was reliable, it was safe, it was secure. Then there was Dropbox, which is like, are you kidding me? This is amazing.  

 
38:02 
Geoffrey Moore 
It was like free lunches, but it wasn't enterprise ready. And so what box did is they said our position is we're going to give you the security of SharePoint with the ease of use of Dropbox. I think when you do those intersections and they coincide with a trap value business process, target market, compelling reason to buy situation, then positioning is easy.  

 
38:22 
Dom Hawes 
And so therefore, if you're currently sitting in a business that finds itself without a distinctive positioning, it's probably time to go bowling.  

 
38:30 
Geoffrey Moore 
And the problem is when people get into trouble, their natural instinct is to think about themselves, not about their customer. And they're trying to make payroll. I'm trying to keep my board of directors or my investors off my neck, but it doesn't work. The bowling alley play says no, work backward from the trap value and build your bridge and pay your.  

 
38:51 
Dom Hawes 
I'm going to go sit on the naughty step myself and work out why I haven't gone.  

 
38:57 
Geoffrey Moore 
Times are tough.  

 
38:58 
Dom Hawes 
Anyway, the other thing I loved, and I mentioned it earlier, I said I was going to come back to it in Zone to Win. You've advocating marketing for power or for profit? And you've mentioned in a podcast I listened to the VC firms really led the way in marketing for power. Markets have slightly changed now though, and VCs are asking a lot of their portfolios to scale profitably because they're worried about cash preservation. So everyone's got to have a runway and there's that kind of default, live default dead position that came out a couple of years ago. How do you see the current climate? Do you see that changes the power or profit dynamic?  

 
39:36 
Geoffrey Moore 
Actually the phrase I want to use is power and performance. But the idea is because we have a lot of performance metrics and if you look at compensation, particularly in public companies, the executive compensation is very performance oriented, and typically it's tied to stock price. They're trying to build a connection to the investor through total shareholder returns, or the moral equivalent thereof. So performance is when you take your existing power and you harvest it, you use your existing power to create financial returns. Investments in power are saying, I'm going to take money off the table from my performance game, and I'm going to spend it on building power, which I will then monetize in a future date. So the power performance thing, the venture people have a very simple. The early stage venture people have a very simple equation. We only invest in power.  

 
40:25 
Geoffrey Moore 
What you want to do is get performance to a vector where people will give you an extraordinary multiple on a company that basically is breaking even. So obviously, nobody's buying the performance, the historical performance of the company. They're buying 100% of the power of the company. So that's pretty straightforward. But private equity has, of course, expanded its purview dramatically. And to be fair, the landscape, the technological landscape, has now had so many layers of technology infrastructure built up that you can play a less disruptive, more broad global game sooner than you could before. So there's a reasons why. But what that does now, that gives private equity the same problem that the public equity people have, which is, how much of my budget should I allocate to performance versus power? I had a conversation with the team at Microsoft, Satya's team.  

 
41:18 
Geoffrey Moore 
And Amy Hood is the CFO there at the time. I think she still is. Where I said, look, guys, you're the most powerful company in my business history intact. But you have lost power every single year of this century. This was in 2014. So you're incredibly powerful, but you're less powerful this year than you were last year. My claim is, the reason that's true is you measure performance, and you don't hold people accountable for power. You just hold them accountable for performance. That struck a chord. And in fact, Amy said, okay, I think there's enough truth in what Geoffrey's saying that we're going to put a power component in the annual planning contract. I think everybody needs one.  

 
41:57 
Geoffrey Moore 
And by the way, in a downturn when you know performance is going to be suboptimal, then that's a good time to invest in power, assuming that you can make payroll. But that's the time, I guess, a.  

 
42:09 
Dom Hawes 
Shift from power to performance, if you have enough power, is a matter of choice.  

 
42:14 
Geoffrey Moore 
Yeah, look, you don't want power for the sake of power. You want power. Ultimately, the performance zone is what matters. That's what affects the world. So we're always investing in power to create future performance. And there are people who live in the incubation zone their whole life, which means they're always creating these incredible futures that they never actually take responsibility for. They're just kind of playing in the performance that, by the way, in a lot of large companies, the incubation zone is really just a corporate playground. It's corporate entertainment, and it's not okay. And it's dangerous because you think you're catching up to and you're not, you're just goofing off. So I think the venture operating model is not playful. Holding that zone accountable for saying, look, you need to show me demonstrable changes in power. All the venture metrics are power metrics.  

 
43:08 
Geoffrey Moore 
So did you create a minimum viable product? Did you get your first customer? Do you get your first lighthouse reference? Have you crossed the chasm? And do you have a repeatable use case? Have you dominated your first target segment? Those are power metrics. The financial returns from those in a large corporation are de minimis, but the power returns are real.  

 
43:29 
Dom Hawes 
So in the recent years, particularly on this side of the Atlantic, and I think in the US as well, account based marketing has become a bit of a buzzword. It's very popular. A lot of people have slightly different views on what it is or how to execute it. But at its most basic level, let's agree, it's the concept of a company as a market in its own right. How important do you think that is as a discipline? Do you think it's new? Or where do you think it fits in the lifecycle?  

 
43:56 
Geoffrey Moore 
When we have talk about Target customer, and we said, okay, let's double click on Target customer for a second. We ended up having six roles, three on the user side, three on the tech. So on the user side, we had the executive sponsor of the business organization that wanted to invest in technology for some productivity reason. We had the departmental manager who had the business process that was going to get invested in, that was going to create the return on that investment. And we had the lead end users who are actually going to do that process. So those are three personas, right? The executive sponsor, department manager, the lead end user, and then on the technical side, you had the technical expert who was going to install and make it work.  

 
44:37 
Geoffrey Moore 
You had the CIO who is going to have the system's responsibility and integrate it with everything else. And you had the CFO saying, okay, are we going to spend this money here. So when I look at account based marketing, I think the reason why you need a discipline here is at different points in the lifecycle, those six personas have different amounts of power in the buying decision. And so at the very beginning of the buying decision, the executive sponsor, who we call the visionary, who's typically not the CIO. CIO is normally a pragmatist. This is a visionary. So they're going to put a bunch of money, or they're going to get a bunch of investment, they're going to create a budget. So they become incredibly important.  

 
45:15 
Geoffrey Moore 
And the technology enthusiast, who is sort of like the person who says, and I really get generative AI, or I really get whatever, that those are the two personas you need to work with when you're crossing the chasm. The number one persona is the business process owner who's got the broken process. That's the person you connect with. And then their boss, the executive sponsor's got to give them some extra money. And those are the two key personas in the tornado. It's like, now the budget's in it. So now you want the CIO and the CFO to be on your side. And then on Main street, it's more of the end user and the systems maintainer. So the point is account based marketing. It's important for you to realize there's six constituencies.  

 
45:57 
Geoffrey Moore 
I don't need to have relationships with all six of them at the same time, but I have to have the right relationships at the right time, depending.  

 
46:03 
Dom Hawes 
On where the technology that you're selling them is in the adoption lifecycle, nothing to do with their lifecycle or yours. It's the technology adoption lifecycle.  

 
46:12 
Geoffrey Moore 
Because, as you know, the technology adoption lifecycle, that's my hammer, and you will be a nail.  

 
46:21 
Dom Hawes 
As we develop this show, we are changing our focus a little. You may have noticed when we started, were focused on the tactics or things that marketers were doing well. We were trying to build a body of reference that others could learn from.  

 
46:34 
Dom Hawes 
And I think we even said that.  

 
46:36 
Dom Hawes 
In the intro to our podcasts. But as we spoke to more and more marketers, particularly as the downturn took hold, we discovered that marketing and the people that do it are facing somewhat of a crisis. Now, I listen to a lot of other really good marketing podcasts, and some of them have been picking up on.  

 
46:55 
Dom Hawes 
This theme as well.  

 
46:56 
Dom Hawes 
And I'm going to list my current favourites on the show notes this week. Anyway, in reaction to what were seeing, we shifted this podcast's focus to making marketing matter where I am today. I think that might have been an over defensive misstep, and some of our recent guests, not least Geoffrey Moore himself, have reinforced this thought. You know, honestly, we I Unicorny cannot make marketing matter like marketing does matter, full stop. It's just that some executives don't seem to realize it. This podcast can't make marketing matter any more than it already does. Instead, our responsibility is to demonstrate how our profession, our skills, our experience, and our vision as marketers. Well, that's what creates value, because value creation is at the heart of our work, and it's what every stakeholder cares most about.  

 
47:52 
Dom Hawes 
Marketing is the value creation engine of every successful business, and today's talk with Geoffrey couldn't have painted that picture any more plainly. We have to show, not tell. That's how we get back to the top. And if we are not already in the conversation about corporate strategy, Geoffrey Moore can help. His work brings together most of the models taught at business school and moulds them into a playbook that you, me, anyone can follow and that our CFO and CEO will understand. Firstly, we need to articulate the difference between market development and promotional communication. If the business is trying to push your team away from the former and towards the latter, now is the time to act.  

 
48:37 
Dom Hawes 
I know that Geoffrey wrote the book for disruptive Technology businesses, and that might not be your business, but so many of the Playbook elements are just as applicable to you as they are to those wannabe unicorns. So if you haven't already, go to Amazon, order the third edition of Crossing the Chasm, explore the Playbooks Geoffrey explains for each stage of the adoption cycle, and use that as a lens through which to reimagine how and who you're marketing to. I would pay particular attention to redefining your market, considering your whole product, and taking a look at how compelling your current customer's reason to buy is. That's all for today, but Geoffrey is going to join us again. We started today referencing Zone to Win, and we're going to come back to.  

 
49:27 
Dom Hawes 
That work in the new year.  

 
49:28 
Dom Hawes 
The theories, processes and playbooks he outlines in that book are being used by some of today's most innovative global businesses. And once you learn the language, you're going to start seeing it everywhere. So make sure you follow us or subscribe to our mailing list at Unicorny Co. UK so you do not miss out. Right, that is it. I'm off to find Jerry at Selby Labs to follow my own advice and seek his to get deeper into our market, deeper into our whole product, and get more understanding of our clients’ compelling reason to buy. See ya.  

You've been listening to Unicorny, the antidote to post rationalized business books. If you've enjoyed the show, why not hit follow? We'd love you to rate or review us on Apple Podcasts or Spotify. And it only takes a few seconds, but it means a lot to us.  

 
50:21 
Dom Hawes 
Or if it's easier for you, please recommend us to a friend or host on LinkedIn. Tagging at Unicorny. I'm your host, Dom Hawes. Nicola Fairley is the series producer, Laura Taylor McAllister is the production assistant, Pete Allen is the editor, and Ornella Weston and me, Dom Hawes, are your writers. Unicorny is a Selby Anderson production. Now go win the future.